There’s a new kid on the block. Previously ASB Securities (owned by ASB Bank) and Direct Broking (owned by Jarden) were the cheapest brokers to buy and sell shares in individual companies listed on the New Zealand sharemarket (NZX). We now have Sharesies, a popular Fund Platform with over 60,000 users, offering this service. How does it stack up against the traditional share brokers?
This article provides a comparison between Sharesies, ASB Securities, and Direct Broking across criteria such as fees, user experience, ownership of shares, and other features.
Update (20 November 2019) – Sharesies now allows you to make limit orders
Update (7 January 2020) – Re-wrote the section on fees, and included a new fee comparison spreadsheet
1. What’s on offer?
There are around 140 individual companies listed on the NZX. Chances are you already interact with some of these companies on a regular basis – such as Meridian Energy, Spark, Air New Zealand, The Warehouse, Westpac Bank, and Burger Fuel. By buying shares in one of these companies, you become a shareholder, and own part of the company!
ASB Securities and Direct Broking allows you to buy and sell shares in any of these ~140 companies. Sharesies also allows you to invest in all companies, except for:
- AFC Group (AFC)
- Aorere Resources (AOR)
- CSM Group (CSM)
- Livestock Improvement Corp (LIC)
- Promisia Integrative Ltd (PIL)
- SeaDragon (SEA)
- Southern Charter Financial Group (SNC)
However, these companies are very small, and extremely illiquid (meaning there aren’t many people buying or selling shares in these companies on a day to day basis). Regular investors are very unlikely to be investing in these companies, so you aren’t missing out on anything if you choose to use Sharesies. Sharesies’ full list of individual companies you can invest in through their platform can be found here.
2. Minimum investment
The minimum investment amount with Sharesies remains at a super low $0.01. Sharesies offers fractional share investing, so even if a share costs more than the amount of money you want to invest, you can still buy a fraction of that share. For example, if a share in Spark costs $4, I could still invest $1 to buy a quarter of a share.
ASB Securities and Direct Broking
Investors using ASB Securities or Direct Broking must buy enough shares to meet the minimum holding requirements determined by each company. Currently only one company, Chorus, has specifified a minimum holding amount of $1,000.
Issuers of securities on the NZX enforce their own minimum holding requirements. Where an issuer has not specified a Minimum Holding, then there is no required minimumShare trading minimum holding requirements, ASB Securities
There is no fractional investing through these brokers, so you must buy whole shares. For example, if a Mainfreight share costs $40, you must invest in increments of $40. You cannot invest $20 to buy half a share.
3. Ownership of shares
When you buy shares through Sharesies, you do not get direct ownership of them. Instead they are owned by a “Sharesies Nominee” which is a custodian holding the shares on your behalf. This has a number of implications:
- You can only sell your shares via Sharesies, so you’re locked into using their platform and paying their account fees (more on fees in the next section).
- You can’t participate in Dividend Reinvestment Plans (DRPs). DRPs are plans offered by some companies, allowing shareholders to automatically reinvest their dividends into buying more shares, with no brokerage costs, and usually at a discounted price. DRPs are a great way to grow and compound your investment. With Sharesies, your dividends are always paid as cash into your wallet.
- It is unclear how Sharesies will handle “corporate actions” on your shares. There is no guarantee you’ll get the full benefits of being a shareholder like being able to vote on important company issues, or participating in rights offers (where companies sell new shares to existing shareholders to raise more capital).
“You acknowledge that we don’t have to forward to you, or take any action on, reports, notices, proxy forms, or other communications we receive about Investments in your Portfolio.”Sharesies Terms and Conditions
– What happens to your money if InvestNow or Sharesies go bust?
ASB Securities and Direct Broking
Shares bought through ASB Securities and Direct Broking are held under your CSN (Common Shareholder Number). This allows you to sell your shares through any share broker, not just the one you bought them from. This also means that your shares are held directly in your name on a company’s share registry.
Having direct ownership gives you the full benefits of being able to participate in DRPs, corporate actions, and Annual General Meetings for the shares that you own.
Winner: ASB Securities and Direct Broking
Brokers charge brokerage fees on every trade i.e. whenever you buy or sell shares. The brokerage fees for each service are:
|Sharesies||0.5% for trades up to $3,000|
Plus 0.1% for amounts above $3,000
|ASB Securities||$15 for trades up to $1,000|
$30 for trades between $1,000 and $10,000
0.3% for trades over $10,000
|Direct Broking||$29.90 for trades up to $15,000|
Plus 0.2% for amounts above $15,000
The table below shows the brokerage fee that would apply to different dollar amounts invested (ASB Securities and Direct Broking show n/a for $100 invested because this falls below the minimum investment amount).
The result is that Sharesies is significantly cheaper, especially for smaller investment amounts. The only thing to watch out for when brokerage is so cheap, is that it could facilitate “taking a punt” or “dabbling” in various companies, while high brokerage fees encourages investors to thoroughly evaluate a company before investing.
Sharesies charges a monthly/annual subscription fee depending on the size of your portfolio:
ASB Securities and Direct Broking don’t charge any ongoing fees.
Although Sharesies is clearly cheaper when it comes to brokerage fees, to work out which broker is cheapest overall, you need to take into account the total cost of owning your shares through each broker. The total cost of ownership includes:
- Brokerage fees to buy your shares
- Subscription fees to hold your shares
- Brokerage fees to sell your shares, at the end of your investment term
However, it is still really hard to say which broker is cheaper for you once you take all of the above into account. There are just too many other factors to consider such as size of your trades, how many regular contributions you’ll make, and how long you hold the shares. Fortunately I’ve built a spreadsheet to calculate the fees based on these variables.
It’s a VERY rough calculation, but should give you a ballpark idea of the level of fees you can expect with each broker, under different scenarios. Let’s run through some example scenarios and see which broker comes out cheaper for each one:
A. Alice from Auckland
Alice wants to invest in a simple portfolio of 5 companies. She intends to make a one-off $10,000 investment in each company, and hold them for 10 years without any further investment. Here’s the fees she’d pay with each service:
– Sharesies: $520
– ASB Securities: $300
– Direct Broking: $299
ASB Securities and Direct Broking are cheaper for Alice. Given her infrequent investments, the lack of ongoing fees for these two brokers are enough to offset her higher upfront brokerage costs.
B. Bruce from Blenheim
Bruce also wants to invest in 5 companies, but intends to do so by investing $1,000 in each company every year, over 10 years, with no initial lump sum investment. His fees are:
– Sharesies: $575
– ASB Securities: $825
– Direct Broking: $1,644.50
Sharesies is cheaper for Bruce, as the brokerage fees from his regular investments really add up for ASB Securities and Direct Broking.
C. Cathy from Christchurch
Cathy intends to invest in 15 companies over 20 years, putting an initial $3,000 in each company, with no ongoing investments. Her fees are:
– Sharesies: $1,050
– ASB Securities: $900
– Direct Broking: $897
Sharesies is slightly more expensive for Cathy. Even though she’s incurring a lot of brokerage fees by investing in so many companies, her long investment timeframe makes Sharesies’ subscription fee add up.
D. Dorothy from Dunedin
Dorothy also intends to invest in 15 companies. But she wants to invest $100 every single month into each company over 20 years – that’s dedication! Her fees are:
– Sharesies: $2,490
– ASB Securities: $54,054
– Direct Broking: $108,088.50
Wow! Sharesies is significantly cheaper for Dorothy! Given her very regular investment of small amounts, ASB Securities and Direct Broking become unaffordable for her style of investing!
In general, Sharesies works out cheaper overall when you’re investing in smaller parcels of shares, or making investments frequently, thanks to their very low brokerage costs. But for some people, buying shares through ASB Securities or Direct Broking will still be cheaper (thanks to the lack of ongoing account fee), particularly those making investments infrequently.
Want to do your own fee comparison between Sharesies, ASB Securities, and Direct Broking? You can take a copy of the spreadsheet I used to do the calculations here (must have a Google account to copy it)
5. User experience
In typical Sharesies fashion, they have provided a fantastic user experience for buying shares. The user interface is uncluttered, easy to navigate, and works great on mobile.
There is still room for improvement though, and I would say the following are the current weak points of the interface:
- There is no ‘watchlist’ where you can place companies you want to keep an eye on. This feature is standard in other brokers.
- Sharesies displays each company’s gross dividend yield, but their data for this is often totally inaccurate.
- You can’t see fundamental company statistics such as market capitalisation, P/E ratio, and Net Tangible Assets, nor can you see any important company announcements. However this data is publicly available on the NZX website.
- By default the companies list by “Highest price change”, and also gives options to sort by “Highest annual dividends” or “Highest annual returns”. This is very concerning – given Sharesies’ targets beginner investors, this feature could encourage investing based simply on the biggest dividends and biggest returns. This is absolutely NOT a good investment strategy. Past performance is not an indicator of future performance, and the very highest paying dividend companies are almost always “Dividend Traps“.
ASB Securities and Direct Broking
These interfaces are dated, cluttered, and unfriendly compared to Sharesies. They don’t offer a mobile friendly view either. I’ll let the screenshots do the talking.
6. Trading features
Live market prices and depth
The share prices are shown on Sharesies are delayed by at least 20 minutes. Because share prices can be volatile, the delay can be problematic as the price of a share could surge, but not be reflected in the price you see on Sharesies.
Meanwhile, ASB Securities and Direct Broking show live prices (as long as you have traded with them in the last 90 days), as well as market depth which is a list of buy and sell orders for a particular share. This can be helpful in informing you about what price to buy or sell your shares at.
All three brokers allow you to place market orders or limit orders:
- Market order – The price you buy your shares at depends on the current selling price. Using the above Spark depth chart as an example, a market order will get you shares at a price of $3.95 per share. This is a slight premium over the current $3.925 share price.
- Limit order – This allows you to specify a maximum price you’re willing to pay for your shares (or minimum price you’re willing to sell your shares at), providing you with more control and certainty.
Although Sharesies introduced the limit order feature on 20 November 2019, it is still at a disadvantage to ASB Securities and Direct Broking. Without live market prices and depth, you have less data to inform you what price to set your limit order at.
Sharesies does not offer the following:
- Trigger orders – an instruction to place an order to buy or sell a share if it reaches a certain price
- Margin lending – the ability to borrow money to trade shares in order to leverage your investment (similar to a mortgage)
Winner: ASB Securities and Direct Broking
If you are very serious about investing in shares for the long-term, and have a decent amount of money to do so, stick with a traditional broker. Although the upfront brokerage costs will be more expensive, you will directly own the shares under your name, won’t be locked in to Sharesies for holding and selling the shares, and can fully participate in any DRPs, rights issues, and voting. Given I don’t buy or sell shares frequently, this little extra cost is worth it for me.
However, Sharesies is still a fantastic option for investing in shares. They offer low-cost brokerage and ultra-low minimum investment amounts, meaning it’s perfect if you want to invest small amounts to learn, or slowly build up a share portfolio with small amounts over time – something that previously wasn’t possible with ASB Securities’ and Direct Broking’s high upfront costs.
However, if you do have a small portfolio, you may want to consider sticking to investing in funds rather than individual companies, due to their convenience and instant diversification benefits. See my comparison between investing in funds vs individual companies to help you decide.
Keen to start building your investment portfolio with Sharesies? Sign up with this link, and Money King NZ will receive $5. A great way to support the site!
The content of this article is based on my personal opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with an authorised financial adviser before making any investment decisions.